Discover Scuba Program – Is it a Loss Leader?

 

Whether your shop promotes the Scuba Discovery, Discover Scuba or Try Scuba Diving – Passport Diving Program, the concept and goals are essentially the same. These are inexpensive introductory programs intended to generate new divers and hopefully long-term customers. While not an actual scuba certification, these programs are designed to offer the individual an experience using scuba equipment in shallow water, and get a quick and easy introduction of what will be involved to explore the underwater world without making the time and financial commitment of a full certification course. But do they work, and if so, how well? Are we actually turning our prospects into divers?
 
In the world of retail a “loss leader” refers to a product that is sold at a low price, usually at or below cost to stimulate or lead to subsequent sale of profitable sales, the sales of which will be made in greater numbers, or greater profits, or both. It is a time-honored practice that has been met with much success, especially by large discount retailers. The intent of this sales promotion or pricing strategy is to not only have the customer buy the (loss leader) sale item, but other products that are not discounted. A great example of this practice is cell phone industry. Cell phones are almost routinely offered for free or at a low cost to subscribers who enter into a contract that is typically between one or two years. The providers profit by retaining customers for a longer period of time, and this offsets the cost of the actual phone device.
 
In brief, at Adventure Scuba Company (Chantilly, Virginia) we conduct our introductory course in an indoor pool no deeper than five feet of water. Class sizes are limited to no more than eight participants. We offer the program once per month on Sunday afternoons. We provide the prospective diver with everything (BCD, tanks, weights, personal gear, etc.) except a towel and a good attitude! We charge a nominal $35 fee to participate, and have each student complete the required medical and liability forms. The session lasts about an hour and half, with a thirty minute introduction and briefing on the gear, some diving physiology and safe diving practices. Topics presented are kept very simplified, to avoid overwhelming the students. Students then get to experience the sport for an hour in the water, and afterwards we debrief them and discuss what is involved in becoming a certified diver.
 
So is our introductory scuba program that we offer at Adventure Scuba Company paying off, do we get a return on our investment (ROI), or is it just a loss leader? To answer the question, I did some number crunching. I took the time to cull through our customer database and pull out all the individuals that have participated in our introductory scuba program in year 2008 and 2009.  I then reviewed each individual’s customer history to see if they actually enrolled in a full certification course and took note of their purchase histories, if any, and ran the numbers. Retrospectively, I also noted how we conducted the program over the past two years, and noted any differences or changes. Lastly, I interviewed the instructors responsible for teaching the class.
 
 
So what happened?
 
In 2008 we had 39 students participate in our discover scuba program. This included a group of eight individuals from the local volunteer fire department, and a group of six participants from a high school scuba club. We grossed $1365 in fees. Of the 39 students, only two were repeat customers, and subsequently obtained full scuba certification. On average, each of these students spent approximately $800 on their course and personal gear.  After factoring our cost to conduct the program which included the pool rental time, instructor pay, air fills, gas for the shop van to transport the gear (remember it ALL adds up), a few minor gear repairs, etc.,  it was evident that the program itself was not a money maker. In fact, we ended up negative when we considered the program as an overall standalone. It only took one significant gear repair to blow our whopping $62 profit.  However, it did help yield revenue downstream from their class tuitions and gear sales to help cover our expenses, and of course generate two new divers! Keep in mind the success rate in generating new divers was only approximately 5%.
 
In 2009 we had 36 students participate in our discover scuba program. We grossed $1260 in course fees. However, in this past year six out of the 36 students were repeat customers, and subsequently obtained full scuba certification. Our success rate increased to nearly 16%. As before each student spent on average approximately $800 on their course and personal gear for their certifications. One student even purchased a full gear package, approximating $2500! Not too shabby!
 
So what changed, and how did we improve?
 
In 2009, we changed the format of how we conduct our program in three areas. First, we decided to relocate and extend the academic portion of the program, and second we awarded each person with a certificate and small incentive package immediately following the conclusion of program. Lastly, we became more diligent with our follow up. In light of the current economy, we refused to alter our course fee. We continued to charge a nominal fee of $35 for an individual to participate in the program. Again, we provided everything for the student to participate in the class including personal gear.  
 
Change #1. Rather than meeting directly on the pool deck about thirty minutes before getting in the water as we did in the previous year (2008), students met at our shop for an hour long orientation at least two hours prior to their in-water experience. While it could have inconvenienced the student with additional commuting (we are in Northern Virginia!), and risk creating a feeling as if they were going to get roped into something resembling a “sneaky timeshare sales tactic,” it did not. It had a very positive outcome with several benefits.  First, it presented students with a chance to see our business and meet our staff, if they have not already when they registered for the program. Second, they had the opportunity to see and touch the gear they were going to be using during their session.  This helped address many questions and eliminate many preconceived ideas about what a scuba diver requires to be underwater. It also provided us with a chance to better fit them for the gear they were going to be utilizing during their session. Body types and shapes vary incredibly and being comfortable underwater is very important as we know. Finally, and most importantly, they could address any of their fears and concerns with their instructor without any time constraints. They actually get to meet the instructor as a person, in plain clothes, see him or her as a real human being as opposed to showing up on the pool deck all geared up like a pro ready to jump in the water. That can be quite intimidating to someone who has some reservations about doing this. Remember, in many cases these students aren’t sure if this is something that is going to be “fun” yet, and/or they are lacking confidence. This is a great opportunity for them to meet the person who is directing them to do the unnatural…shove their heads underwater and breathe! I believe this opportunity lowers their inhibitions, defenses and stress. It puts them at ease and really helps create the necessary rapport and trust between the students and the instructor, and thus our business. 
 
Change #2. After the students get out of the water, smiling, the instructor congratulates each individual and awards them with a certificate of completion with the student’s name on it. It looks professional and is printed on quality paper. It makes them feel good and proud of their accomplishment and it gives them something tangible to remember the experience. Additionally, it is a good marketing piece when they show it to their friends and colleagues. We also include an incentive coupon for them to register for a full certification course at a reduced fee. Additionally, we include other marketing goodies such as stickers, pens, and plenty of business cards to hand out. Yes, this now eats into our cost too, but they are excellent opportunities to promote the shop.
 
Change #3. A successful discovers scuba program doesn’t end after the students leave the water. It requires follow up in a timely manner from two different avenues, the store manager and the instructor. As the shop manager it is my responsibility to follow up with the instructor to see how the program finished, address any concerns or issues, solve any problems, and make sure things are ready for the next session to run efficiently. Of course I also want to know who had a good time, why, and when do they want to take a class I find that the best response results from the instructor contacting the students directly, while these students are still excited and energized from their experience. This happens within the next week. It is equally important to find out who did not have a good time and why. Is there something we missed, did the student develop some apprehension during the session, or are there concerns regarding finances and time commitments? There could be a number of reasons why some do not want to continue and obtain a full certification, and we need to know them if we want to improve.
 
It was evident that our number of participants in the program did not increase from year 2008 to 2009. In fact, there were fewer students in 2009. What did change though was the quality of our program and how we conduct it. I believe this made the difference.
 
What’s next?
 
Seeing an almost three-fold increase in our turnover after we implemented these changes has our business excited about conducting more of these programs, and making them quality experiences. We have done the analysis and realize that the program, as we currently have it structured and priced, is not revenue generating machine on its own, but is rather indeed a loss leader. We are okay with this though. Knowing this and the potential that this program can afford our business resulting from subsequent purchases makes it worth while. 
 
This year we decided to create a “free discover scuba card”. It is simply a business card which serves as a coupon and entitles the person to a free Discover Scuba session. The entire staff carries them, we give them to instructors, customers and fellow divers to disseminate, and we hand them out like candy!
 
 

 

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